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Good Vibrations

The old adage “You get what you pay for” is apt in the case of radio frequency identification technology. Although it isn’t cheap, RFID has tremendous potential to improve supply chain performance, according to a new report from AMR Research. Of about 55 retail and consumer goods executives AMR surveyed in April, 63% were evaluating Electronic Product Code and RFID technologies; 10% had either installed them or set up pilot projects. Respondents said that the top benefits from EPC/RFID would be reducing out-of-stock levels, speeding up inventory turns, improving order fill rates, and decreasing warehouse operating costs. The AMR report notes that EPC/RFID users have gained significant returns on their investment, with some companies reporting savings of 20% on labor, inventory reduction of 25%, a 3%-4% increase in sales, and a striking 80% drop in theft and fraud. Still, the cost of installing the technologies remains high because of the price of not only the devices themselves but the substantial infrastructure required to support them. To equip your supply chain for RFID, be prepared to spend $2 million per warehouse, $1 million to $2 million per plant, $10 million or more for headquarters systems, and an annual outlay of 7 to 20 cents for each tag.